Bilibili Q4 Ad Revenue Gains 28% Offsetting Game Sales Decline

TMTPost -- The American Depositary Receipts (ADRs) of Bilibili Inc. tumbled as much as 8.8% in the morning trade and closed 1.9% lower to US$10.60 on Thursday, a day after shares rallied to their highest since January 11. The shares slide came after the Chinese video and gaming platform posted mixed financial results in the last quarter of 2023.

Credit：Visual China

Bilibili said its total net revenue in the quarter ended December 31 increased 3% year-over-year (YoY) to RMB6.3 billion (US$894.3 million), matching the analyst expectation. Non-GAAP diluted net loss per share narrowed 59.5% from a year ago to RMB1.34, better than the estimated loss of RMB1.43. Non-GAAP adjusted net loss was RMB555.8 million, narrowing 58% from the same period of 2022.

For the full year 2023, Bilibili reported total net revenue of RMB22.5 billion with a 3% increase from 2022. The annual adjusted net loss narrowed by 49% to RMB3.4 billion, and adjusted diluted net loss per share was RMB8.29, compared with the loss of RMB16.95 in 2022.

Bilibili’s two major businesses maintained robust growth in the fourth quarter. Value-added services (VAS) brought RMB2.9 billion, representing a 22% YoY increase, compared with a 17% growth for the previous quarter. The company said VAS benefited from revenue growth of livestreaming and other value-added services. Revenue from advertising surged 28% YoY to RMB1.9 billion, versus the growth of 21% in the third quarter. Bilibili mainly attributed the stellar performance of ad to its improved advertising product offerings and enhanced advertising efficiency.

Bilibili’s game business experienced a steeper-than-expected decline in the December quarter. Revenue from mobile games dropped 12% YoY to RMB1.0 billion, while it edged up 2% from the previous quarter. The YoY decrease was mainly due to the high base from the release of Space Hunter 3 in the second half of 2022, while revenues from top-performing legacy games, like Azur Lane and FGO, remained relatively stable. Mobile games recorded a 33% YoY decline in sales for the September quarter, primarily owing to the high base from the release of Space Hunter 3 and lower-than-expected revenues from certain new games. Revenue from IP derivatives and others, formerly known as E-commerce and others, fell 51% YoY to RMB556.0 million, mainly resulting from a decrease in revenue from e-sports copyright sublicensing. Sales of IP derivative decelerated as the business recorded a 23% YoY decrease.

Through the year 2023, Bilibili failed to find any traction from new game titles and its performance is accordingly mainly supported by advertising and livestreaming. It is the ad and livestreaming that offset lackluster of games and help deliver stronger-than-expected overall revenue in the fourth quarter. Bilibili chairman and CEO Chen Rui cited growth of VAS and advertising as evidence of improved financial profile and highlighted healthy community growth. “We continued to build our large community with DAUs exceeding 100 million in the fourth quarter, while users’ daily time spent remained robust at over 95 minutes on average. Meanwhile, to better serve our content creators and strengthen the overall community ecosystem, we further advanced our commercialization strategy and improved various monetization products. In 2023, over 3 million content creators earned income on Bilibili, up 30% compared with 2022,” Chen said.

While Bilibili can further boost advertising with increase of ad load rate and improve livestreaming with more daily active user (DAU) and payment for subscription, both of businesses have already passed their low-base periods and are more vulnerable to increasing competition. The Shanghai-based company has to rely on turnaround of games if it wants to achieved a significant recovery with a growth of more than 10% for its overall revenue.

Bilibili suddenly announced removal of Uma Musume Pretty Derby from Apple’s App Store and Android stores on September 7 2023, only a week after it launched the Chinese version of the hit Japanese game. The game, created by Cygames, was debuted in 2021 in Japan and raked in about US$1 billion that year. Bilibili said over one million domestic players had pre-registered before the official launch. It left no specific reason for the removal but the need for technical upgrades. Uma Musume Pretty Derby is expected to be relaunched this year, though Bilibili executives didn’t disclose when the relaunch will come true at the earnings call. Sam Fan, or Xin Fan, the chief financial officer (CFO), told analysts that three titles in Bilibili’s top line have been approved for release in China in the coming quarters, including a Japanese card game, a domestic SLG game and a domestic card game. Fan said the company will also create value for its broader game partners by increasing integrating its advertising products with its game distribution capabilities.